How did American workers survive? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 30 July 2013
How did American workers survive? A  A  A

Poitou, France

Amazing how much difference a few years makes. We first visited China in the 1980s. It was an appalling dump. Few cars. Few roads. Almost no decent restaurants or hotels.

Now, in Beijing, you see large black luxury automobiles everywhere...modern highways crisscrossing in front of huge hotels and apartment buildings.

The Chinese have made real progress! And what about Americans?

But let's check in on Wall Street before we continue our tale. Uh huh...nothing much going on there. Monday was another lazy, hazy, crazy summer day. Neither stocks nor gold did anything worth talking about. So...back to China...

Nobody had any money in China in the '80s. By contrast, today, you lose control of your car in downtown Beijing and you are bound to run over at least a couple millionaires.

"We are very much aware of our extraordinary good fortune," said a Chinese man in his 50s. "We grew up with nothing. Now, we are able to dine in fine restaurants, live in fine houses, and travel to other parts of the world. And I thank Chairman Deng Xiaoping for having the wisdom to point us in the right direction and the party leadership for having the good judgment to keep us on the right road."

The party leadership is not infallible. Neither in China nor in America. In both countries, the feds - looking out for themselves - make policy decisions that are disastrous for others.

We were only in China for a few days. We have no idea what calamity the central planners will cause in China. But we can take a fair guess of what they will do to America. Broadly, China's feds encouraged people to build too many factories, malls and apartments. America's feds encouraged the opposite error - borrowing and spending too much for consumption purposes.

China's real wages doubled in the last ten years...after doubling in the 10 years before. That is why the Chinese feel so much better off. They ARE much better off.

"Yes, we know there may be a slowdown...or even a financial crisis...coming. But we have gone ahead so far, so fast we can put up with a little backsliding," said our friend cheerfully.

"Nothing good in India"

It was a privilege. A pleasure.

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"In 1980s, you were still a successful country. But politicians made more and more mistakes in India. I don't see that changing anytime soon..."

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Americans are not likely to be so cheerful about it. But then...they've lost ground, not gained it. And now, down at the bottom of the pay ladder, US workers are fed up. Bloomberg:

    Fast-Food Workers Strike for Higher Wages in U.S. Cities

    Thousands of fast-food workers from restaurants such as McDonald's Corp. (MCD) and Wendy's Co. (WEN) walked off the job beginning today to protest for higher pay.

    American fast-food and retail workers have been striking this year for higher wages, and the protest starting today seeks wages of $15 an hour, 66 percent higher than the $9.02 that U.S. fast-food cooks earn, on average. In April, employees from McDonald's and Yum! Brands Inc. (YUM), which owns the KFC and Taco Bell chains, joined workers from Macy's Inc. (M) and L Brands Inc. (LTD)'s Victoria's Secret chain in walking off the job in Chicago and New York for higher pay.

    The leisure and hospitality industry, which includes restaurants, is adding jobs faster than any other sector in the U.S. In June, the sector added 75,000 jobs, according to data from the Bureau of Labor Statistics. Fast-food cooks make $9.02 an hour, or about $18,760 a year, on average, according to 2012 data from the Washington- based agency.

Let's see...according to the official numbers....$1 when we were born (after WWII)...was worth about $10 today. But the official numbers are fishy. An average house in 1950 sold for less than $10,000. Today, (after a big sell-off following the sub-prime mortgage debacle of 2008) the typical house sells for about $150,000. On that basis, keeping up with your number one cost - housing - would require 15 times as much money as it did in 1950.

Do people earn 15 times as much? After the war, a typical family had a single wage-earner with a salary of about $250 a month, or $3,000 a year. The minimum wage was 75 cents an hour, or about $120 a month. On an average wage, a man was able to support a family and buy a new car every three or four years. A new car Oldsmobile 'Rocket 8' was priced at about $1,500, or about half a year's wages.

Today, a median wage-earner gets $30,000 a year, 10 times as much in nominal terms. But now, despite the feds' phony numbers, he has much less purchasing power. Without even beginning to calculate the effects of higher taxes, healthcare and education expenses, we can see that he has to devote at least a whole year's wages to buying a new family car - twice as much as in 1950. As for the house, that's 5 years' wages...twice as much as it was in the '50s.

As you can see, the real wages of the typical working man have actually gone down for the last 60 years. In terms of his time, his most important acquisitions are more expensive today than they were in 1950.

How did American workers survive...with lower real wages and higher living costs? First, they began to work longer hours. Wives went to work. Husbands worked a second job. Now, Americans work more hours than any other group. Second, and most important, from our point of view, they began to borrow. Aided, induced, and bamboozled by the feds' EZ credit policies...they went deep into debt to keep up with own standards of living.

More to come...

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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2 Responses to "How did American workers survive?"


Jul 30, 2013

In 50s how many Americans owned cars compared to Today.
How many more other durables he has compared to the past.
What are the other parameters which make Americans Life better than it was?
I would like to be enlightened.



Jul 30, 2013

American view on Asian countries are generally wary; thay need us to open up the market for easy access to invest and exit with out any control . manipulate the market make quick profit and fly to the next green field . if any government does n't provide such access they are unholy region . they have no permanent friends or enemies, only permanent interest to develop and nurture there own interests.
from the basic carector of atypical American Jim is right in his views . that will not affect the Indian business ventures , or our business or growth prospects . After a generation or two the same westerners will have to reach the Asian countries in search of migration or for a job , considering their growing debt profile.

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